Rethinking Your Business: Quick Wins vs. Long-Term Gains

Philip Kotler once said, "Doing what is strategically right has more significance than doing what is immediately profitable." This strategic mindset plays a crucial role in business transformation. Changing how we view business isn't just about fixing current problems, but primarily about building lasting foundations that will enable growth in the long term.

A few years ago, I worked with an entrepreneur who was aiming for quick success. He had a product, a sales team, and a simple plan: minimal investment, fast sales, and no long-term strategy. Initially, the business grew rapidly, but over time, issues arose, leading to a market exit. The entrepreneur claimed the market was oversaturated, but the real issue lay in the lack of long-term thinking. Quick profit can be tempting, but sustainable growth requires deeper transformation and a broader perspective.

Key steps in an effective company transformation:

1. Instead of short-term profit – building long-term value

The first step in transforming a company is changing the approach: rather than focusing solely on immediate results, it’s essential to look at the bigger picture and ask, What is our market position, and what value do we provide to our customers in the long term? While quick profit might be appealing, the real driving force behind a company’s growth is the ability to build lasting relationships with customers and offer them value that goes beyond temporary benefits.

In this process, it’s crucial to understand customer needs and align the company’s strategy with their long-term expectations. Too often, companies focus on short-term indicators, ignoring the customer needs that could contribute to the company’s long-term success. Using strategic analysis tools that evaluate both market position and the value the company delivers can help build a stronger, more stable brand.

2. Company finances – a long-term analysis

Financial transformation of a company isn't just about managing current profits, but about understanding how we manage resources and the long-term impact of our financial decisions.

First, it's important to understand the difference between short-term profit and long-term value. Instead of aiming for rapid growth at the expense of stability, a financial model should be built that allows the company to survive and grow over time. Quick profits can lead to liquidity problems, which often trigger crises.

Second, financial analysis should cover different profitability levels within the company. Every company has segments that generate varying levels of profit – some products might bring losses but still have strategic significance for future growth. It's worth identifying which units are crucial for long-term growth and which are burdensome.

Finally, although the equation revenues minus costs = profit is simple, the answer to what truly brings value is more complex. Every element of the offer should be evaluated based on how it contributes to the company's overall profitability in the long run.

3. Strategy is not a luxury

Many entrepreneurs, especially in smaller companies, believe that creating a strategy is unnecessary. However, strategy is the “game plan” that sets the direction for action based on a realistic assessment of resources and goals. It's not about creating complicated documents, but rather a plan that is understood by everyone, enabling effective use of resources and achieving long-term goals.

Understanding a company’s strengths and weaknesses, as well as clearly defining the direction in which it wants to grow, forms the foundation of an effective strategy. It is also a tool that allows for more informed and thoughtful responses to changes in the market.

4. Transformation and continuity of actions

Change in a company shouldn’t be a sudden break from the past but rather a thoughtful, gradual process that maintains continuity of past actions while introducing new, more efficient solutions.

Transformation is about continuous improvement at every level of the organization. A key role here is played by the commitment of the management team – without leadership support, the transformation process can fail. As the saying goes, “The fish rots from the head” – change must start at the top to encompass the entire organization.

Summary

Transforming a company is a process that requires not only courage and reflection but also long-term thinking. The key is combining three perspectives: strategic – analyzing the company's market position and building lasting value for customers; financial – understanding which activities generate profits and which are unprofitable in the long term; and operational – investing in continuous improvement of internal processes.

As Kotler said: “Today, you have to run faster just to stay in the same place.” A well-thought-out transformation not only helps maintain pace but also allows you to get ahead of the competition in a demanding market.

Copyright, 2023